If Government Uses Taxation to Correct for Negative Externalities, the Desired

question 169

Multiple Choice

If government uses taxation to correct for negative externalities, the desired consequence is

• A)a decrease in the quality of the good produced.
• B)an increase in the quantity of the good produced and/or consumed.
• C)a raise in revenue that can be used to provide subsidies to consumers.
• D)a decrease in the quantity of the good produced and/or consumed.
• E)increased revenue.

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Definitions:

Opportunity Cost

is the value of the next best alternative forgone as a result of making a particular choice, highlighting the trade-offs in decision-making.

Absolute Advantage

The ability of a country or individual to produce a good or service more efficiently than others, using fewer resources.

Terms Of Trade

How much of one good exchanges for a unit of another good.

Comparative Advantage

The ability of a country or entity to produce a particular good or service at a lower opportunity cost than others, leading to more efficient international trade.